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Currently the costs are prohibitively large for local energy companies.
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Tackling the ‘impossible’ costs: Steve Shaw on the Local Electricity Bill

Currently the costs are prohibitively large for local energy companies.

In June, the Local Electricity Bill was introduced to Parliament under the Ten Minute Rule, as its proponents called on the government “to unleash the huge potential for new community-owned clean energy infrastructure” by supporting it.

First conceived and drafted by not-for-profit organisation Power for People around 2017, the Bill was first introduced to parliament last session and has continued to grow grass roots public support since then.

Speaking to Current± recently, Steve Shaw, director of the group, explained: “If you want to sell energy directly to local customers at a local scale - and local in this context might mean across a town, or a few towns, a handful of villages, countywide or even regional - the costs are so large that it just makes no financial sense. It is not viable financially.”

The costs are made up of a number of aspects of the energy framework in Britain, for example the balancing codes used by the sector which run to thousands of pages. While these codes are important to keep the grid stable, the cost of legal, technical and software experts to interpret and ensure a company interacts smoothly with the system at large can be immense.

“The interesting thing with this particular example of cost is that those codes at the moment are controlled by the largest incumbents, so the Big Six utilities. So it's an oligopolistic structure,” said Shaw.

“That's just one example of the costs, we're talking well over a million pounds of start-up costs just to get all of those systems in place. This is evidenced by organisations like the Institute for Public Policy Research, and there was a House of Commons library report that also evidenced similar levels of costs.

“Obviously, impossible - and this is just one example but there are many more that make it impossible for any licensed local supplier to make a business case with a cost of that nature.”

Additional costs include the requirement for all companies to have at least £2 million in the bank to act as a buffer at any one time, and the fees that you have to pay to the grid network which are designed for national operation, Shaw continued.

The impact of the current system on local energy businesses has already been seen at council-owned companies, such as Nottingham’s Robin Hood Energy and Bristol Energy, which have struggled due to the “unprecedented challenges” of the sector.

In order to have a chance of success under the current market framework, a company needs an estimated 250,000 customers. Historically the structure made sense, due to the privatisation of the sector in the 1990s, leaving the UK with a few large companies, which later became the Big Six.

It made sense to have a “big, oligopolistic structure, because we had the big power stations and we had almost no small scale generation,” said Shaw.

“But now it makes no sense. Technologically we can do it, the generation is there, and the potential for all of that generation to be renewable and distributed is fantastic, so we have to change the rules, the market structure and that is what the Bill does.”

The Local Electricity Bill was put together by Power for People and a coalition of supportive partners including Community Energy England, Community Energy Wales, Community Energy Scotland, WWF, Greenpeace, Friends of the Earth and the RSPB. Additionally, 43 county and local authorities have also pledged their support.

It was presented to parliament by the lead sponsor Peter Aldous, MP for Waveney, on 10 June, supported by a cross party coalition of 187 MPs. It successfully passed its first reading without opposition.

“However, it is in no way job done,” said Shaw. “To see it made law, our experience tells us that we will need well over half of the House of Commons in support. There is no number, it doesn't work like that, but to give a kind of idea, we need about at least 400 MPs. So we are certainly not there yet, but it's really strong.”

Shaw and other members of Power for People have been leveraging campaigns for Parliamentary Bills to make an impact on the UK's approach to climate change for years now.

“To give you an idea about how this often goes, I helped write the first draft of the Climate Change Act or Climate Change Bill as it was in 2005. It was five pages, a handful of clauses, and it contained the core principles that were in the final act, which were a legal duty on the government to introduce policies to reduce emissions over time with five yearly carbon budgets and so on.

“The final act was 125 pages, and that was fine, it needed all of those extra little bits of detail to make sure that it worked, but we didn't draft 125 pages at the start because the campaign would never have worked. You draft a bill initially that just kind of has the core principle, and then later the detail gets added to make it work.”

Going forwards nothing is set in stone; the group needs to continue to build grass roots support and there are things that could still go wrong, such as opposition from the “awkward squad” in parliament. But Shaw hopes that it could pass in 18 to 24 months as an estimate.

“Doing this, writing a bill and campaigning for it to actually become law is so effective, I cannot even say. It's almost so effective it's hard to believe, and most people can't when they look at the straight numbers."

Shaw finishes: “I could go on, the Climate Change Act, my god! The Climate Change Act in 2008 cost about £1 million in total, and the biggest offshore wind farms have been built since then because of that act. They lay off the coast of Britain. Almost every coal power station has been closed. The scale! It's astonishing that everyone isn't doing this kind of thing, because it is just so effective.

“It is so efficient and so effective to do this kind of work. It involves people that get excited, you create a law, you fix a problem, it's just amazing.”

Editorial

Molly Lempriere Deputy Editor, Current±

Molly Lempriere is deputy editor at Solar Media, responsible for its UK-facing publications Solar Power Portal and Current±.

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